Thursday, July 21, 2011

Costs of free (15 May 2009)

Will attention replace money as the medium of exchange? Is this even possible? Or does attention always have to ultimately be monetized at some point for that illusion to be tenable? A related question: can attention be monetized without infringing on one's rights?

3 Quarks Daily links to this article in the Liberal by William Davies about the potential trade-off between free goods and political freedom. We may be placated by free goods while our behavior is circumscribed and our liberty curtailed. For instance, a municipality might offer free Wi-Fi but also institute traffic-light cameras and monitor what you do while you are online taking advantage of that free deal. This sort of thing is already going on in Europe:

It emerged last year that certain British internet service providers were partnering with a company called Phorm to analyse their customer’s online behaviour and help personalise advertising without the user’s consent.

We can become mesmerized by the price of goods and lose sight of the other values at stake -- it's the same fallacy that leads Americans to sacrifice time for money, to commute 4 hours a day in exchange for the ability to own a big house.

Also, cash is an anonymous means for acquiring goods, whereas the putatively free means of acquisition involve offering data that can be used to track the consumer. Cash prevented the consumer from being judged -- everyone's money was green, so to speak. But the sort of relationships sanctified by "free goods" entail a different arrangement: "Anonymity is replaced by new digitally constituted bonds, as consumers are locked into more enduring relationships with producers. Yet these are not the bonds of some halcyon pre-market community, but something new, with new forms of judgement about which customers are to be included or excluded." Some people are worth giving free things to, in the promise of exploiting the relationship down the road. Others are just mooches. And "free" is a way of disguising the real method of payment, whatever that may be. It obfuscates the exchange relation; some may even be duping into thinking it’s a gift relation.

Perhaps more insidious is the possibility that the "free" provider eliminates the competition and thereby inhibits the freedom of choice in the marketplace: As Davies explains, detailing the Friedmanite argument, "prices prohibit those who can’t afford them, but the price system is guaranteed to preserve some element of choice, even for the poor." In other words, monopoly power can be consolidated by offering a "free" product that is actually subsidized indirectly by consumers, usually through their attention being brokered to advertisers. Of course, if you believe the Hayek/Friedman case, prices are necessary to coordinate information across a complex and otherwise unmanageable economic system. If goods masquerade as free, then only those with access to what they truly cost will have access to the vital economic information -- the economic as a whole will grow thereby more inefficient or will come to be dominated by fewer and fewer players. Of course, it would make perfect sense that technology would ultimately function that way, allowing those with small advantages in information to lever that discrepancy up and seize more power. If you can remove the possibility of using price as a competitive weapon, than you've gone a long way toward protecting a perpetual monopoly.

I'm not so cynical as to preclude the possibility of gifts, to argue that there is always something self-interested at the root of every exchange. But for companies this is so -- they aren't capable of altruism. Only social relations can spawn gift exchanges. But the intensification of the degree to which society is mediated by technology is eradicating those social relations, replacing them with exchanges that conform to the market model. (I'm thinking of Facebook's culture of reciprocity.) At that point the idea of "gifts" itself is threatened, in danger of being masked by loss-leader pseudogifts.